It’s not essential to have a banking license: Ajay Piramal 

It has been a good journey, especially from the point of integrating such a large organisation. There was a lot of negativity in that organisation because of all the PR and news around it.  When we acquired DHFL, there were about 2,300 people; today we have 13,250. Besides, we had about 230 branches at that time, and today we have 430 branches, plus some microlending branches. What’s important is that more than 95 per cent of employees were happy with the whole process of integration. It’s resulting in better business. Disbursals in the June quarter were almost ₹6,000 crore, compared with monthly disbursals of not even ₹200 crore when we started. The asset quality is also better than what we had assessed. Overall, it was a challenging one, but it has had good results.

We have 430 branches, plus some microfinance. Our ‘high touch’ and ‘high tech’ are in the same place; one is not substituting the other. Our target market is tier-2 and tier-3 cities where banks are not willing to give credit to most people. Therefore, a physical meeting is very important to assess their status, loan requirements, and repayment ability.

When we acquired DHFL, retail was 5 per cent of our total book. Today, it’s composition is 55 per cent and 45 per cent is wholesale. We are going to make this at least 70–75 per cent and the balance from wholesale. We have invested in people and branches, and they’re using technology. The productivity of these branches will keep going up over time, and as productivity increases, we will also increase our geographic expansion.

The niche is really to go into those tier-2 and tier-3 areas. Today, in terms of affordable housing disbursements, we are already the largest. Our distribution setup is going into those areas where banks and other traditional lenders have not gone. Building this strong distribution link with our technology is going to be a niche.

We had sold our investment in Shriram Finance, which got us ₹4,800 crore. Our buyback is ₹1,750 crore; it’s a very small portion of it. Our equity today is about ₹31,000 crore, which, which amongst NBFCs, is the third largest net worth. The debt-to-equity ratio today is 1.2:1. Cash on our balance sheet prior to the buyback was almost ₹8,000–9,000 crore. There is enough available to do any acquisition as well as focus on growth. Even if we double our book from where we are, we may not need additional capital. That’s why we felt it was a good thing to reward shareholders, that too minority shareholders. Promoters are not taking any stake in this buyback.

Even if I double the book, which today is ₹65,000 crore, it is not essential to have a banking license. It is not the bedrock of our strategy. Our focus is on executing right so that we can reach this number. We want to do it in the right manner, see that we are compliant with all the regulations, and have adequate controls and risk matrices.

For the wholesale business, there are two strategies. One is what we call wholesale 1.0 where we are reducing the book that we had in the previous (cycle). We’re adequately provided on that book. From Rs 43,000 crore in March 2022, it is down to about Rs 26,000 crore as on June 2023. At the same time, the real estate cycle has seen an upturn. Secondly, there is a gap due to the merger of HDFC Limited and HDFC Bank; that’s another area. Thirdly, we have a history and relationships with more than 400 people. With all this, we are now creating Wholesale 2.0, which is different from Wholesale 1.0 as it will focus on granular loans. The average ticket size is Rs 165 crore which is a small number for wholesale loans. We are not doing structured finance. We are only doing cash flow-backed financing.

It’s a long-term investment. With our large distribution, we are going into areas where not many financial services products are available. We can tie-up with some of the home loans offered by us. We are working synergistically with them.

If India must grow and we want to become the third-largest economy in the world, credit will be one of the biggest areas of growth. The credit space will grow almost 18 per cent year over year, and there is space for many people.

We feel that with UPI, payments are no longer an interesting space.

We’ve been watching this from the end of last year. Unsecured loans have had a good run from 2015 to date without any issues. History shows that there will be some issues with the quality of loans. RBI has been pointing it out. We’ve become more conservative and tightened the risk parameters within this framework.